ABSTRACT
Capacity cost management has as many faces as there are forms of assets and strategies that shape their use. In both operational and tactical capacity cost models, the emphasis is on the deployment of existing resources. The cost of capacity in these short- and intermediate-term approaches can be measured with a reasonable level of accuracy because the resources that make up the defined capability to do work can be identified. Strategic capacity cost management builds from knowledge gained at the operational and tactical levels. The resource effectiveness model (REM) was developed by Hills Pet Food to prevent errors in future strategic capacity decisions. Value-based capacity models (VBCM) is shaped by the external market and its assessment of value, not the internal dynamics of the firm or its current management philosophies. One of the most common traditional issues in strategic capacity cost management is the decision to add a new plant or a new line to an existing plant.
